from the a-little-history-lesson dept

Missed this when it first came out, but Bloomberg ran a fantastic report at the beginning of February, highlighting how piracy and fraud were key components to helping America catapult into the industrial revolution. In fact, there are reasonable arguments to be made that if the US was not a "pirate" nation, it would not have had the kind of success that it has had as the industrial world leader. We've discussed some of this in the past, and have highlighted how Eric Schiff's research showed how other countries (the Netherlands and Switzerland) industrialized by explicitly rejecting patents. The US didn't go that far, but it did involve quite frequent copying of the efforts of others and then improving on them, without fear of repercussions.

In its adolescent years, the U.S. was a hotbed of intellectual piracy and technology smuggling, particularly in the textile industry, acquiring both machines and skilled machinists in violation of British export and emigration laws. Only after it had become a mature industrial power did the country vigorously campaign for intellectual-property protection.

This is a point we've made many times as well. Patent and copyright system supporters frequently argue that stronger laws are needed to create incentives for creation and innovation. But, there are a ton of studies that show the actual pattern runs the other way. When you look at the pace of innovation before and after a change to patent laws, or if you do cross-country comparisons at the same time for similar types of economies, you quickly see that those with weaker laws show more innovation. The ratcheting up of patents is rarely about increasing incentives to innovate. Patents are put in place with the support of incumbents, knowing that it allows them to "exclude" competitors and upstarts. It is not a tool of innovation, but a tool to suppress disruptive innovation. Not having those laws (or having them widely ignored) leads to a situation in which people continually improve what's out there -- which is how the US economy took over the world during the industrial revolution.

The most candid mission statement in this regard was Alexander Hamilton’s “Report on Manufactures,” submitted to Congress in December 1791. “To procure all such machines as are known in any part of Europe can only require a proper provision and due pains,” Hamilton wrote. “The knowledge of several of the most important of them is already possessed. The preparation of them here is, in most cases, practicable on nearly equal terms.”

Notice that Hamilton wasn’t urging the development of indigenous inventions to compete with Europe but rather the direct procurement of European technologies through “proper provision and due pains” -- meaning, breaking the laws of other countries. As the report acknowledged, most manufacturing nations “prohibit, under severe penalties, the exportation of implements and machines, which they have either invented or improved.” At least part of the “Report on Manufactures” can therefore be read as a manifesto calling for state-sponsored theft and smuggling.

In fact, as the article notes, our own original Patent Act recognized this very fact, by refusing to cover foreign inventions.

Of course, the idea that loose patent and copryight laws can help nations develop economically is not a new idea. Over a decade ago, we were writing about how various officials were admitting that strong IP laws probably did more harm than good for developing nations. And, yet, the US continues to try to push its extreme maximalism for copyright and patent laws around the globe. Either they are doing this out of ignorance (a real possibility) or because they actually understand the truth, which is that other countries with IP laws like the ones in the US will see a slow down in their economic development.

Either way, those who insist that the US was founded on the principles of strong respect for "intellectual property" haven't paid that much attention to the actual history of American industrialization.

from the that's-not-a-good-thing dept

As you recall, last month's SOPA/PIPA protests were followed the very next day by the US government shutting down Megaupload. While there have been plenty of discussions about the wider implications of the January 18th anti-SOPA/PIPA protests, there's been less analysis about the wider impact of the Megaupload case. Lawyer Philip Corwin has a long (really, really long) article suggesting that the longer term impact will come more from the Megaupload shutdown... and not in a good way.

It is however the viewpoint of this article that the Megaupload indictment will likely be seen in the long run as having a more significant impact on Internet business models and innovation than the withdrawal of PIPA and SOPA — and this would be the case even if those bills had been enacted in some combined form.

The article covers a lot of ground (much of which you'll already be familiar with, if you read Techdirt regularly). But the gist of it is that the details of the indictment significantly blur the lines between what is civil and and what is criminal copyright infringement, and also rely on multiple, very common practices for various cloud service providers. While the US government cheers on the fact that other cyberlockers are changing how they operate, there's significant fear that this will massively alter the "cloud computing" landscape, in that it creates a tremendous amount of uncertainty, where services with perfectly legitimate intent can be accused of criminal activities based on very questionable claims. Perhaps the most ridiculous is the catch-22 situation in which Megaupload got blamed for trying to hide the infringing activity on its site. If it had left it up, it would have been accused of facilitating or inducing infringement, but by making it hard to find, it's accused of conspiracy to hide the activity.

Megaupload removed the search feature on its website, which had previously been of assistance to those looking for infringing content. The indictment alleges that this was done to disguise the company's willful infringement, much of which was purportedly facilitated by other "linking" websites operated by unrelated third parties. But if the search feature had not been removed, wouldn't that have been cited as evidence of facilitating infringement? Similarly, the indictment notes that "browsing the front page of Megavideo.com does not show any obviously infringing copies of any copyrighted works; instead, the page contains videos of news stories, user generated videos, and general Internet videos in a manner substantially similar to Youtube.com", but then cites "the most-viewed videos in the Entertainment category on Megavideo.com… has at times revealed a number of infringing copies of copyrighted works that are available from Mega Conspiracy-controlled servers" as evidence of knowing facilitation of commercial infringement.

Damned if you do, damned if you don't.

But the bigger fear is about the kinds of businesses that are put at risk under the vague standards used in the indictment. The article talks about popular services like Dropbox, which could be accused of many of the things in the Megaupload indictment. It also talks about YouTube, and how -- if these kinds of enforcement actions were popular five years ago -- we might not have had a YouTube any more:

A recent New Yorker profile of YouTube's evolution makes one wonder if the "YouTube Conspiracy" might not have been criminally targeted if this enforcement tactic was being employed when it launched in 2005, especially since e-mails between its principals indicated a deliberate toleration of infringing content to build traffic — e-mails that bear a distinct resemblance to some of those reproduced in the Megaupload indictment.

For all the talk of how SOPA and PIPA were bad for changing the way the internet would have to work, it's worth noting the very very real impact of the Megaupload takedown on the potential development of various new services and business models. The risks and uncertainty increased massively on January 19th, and not in a good way for anyone.